Bet on multi-cap funds for disciplined exposure across market caps

However, the minimum 25% exposure to each of the three market caps also makes them volatile

Multi-cap funds have outpaced flexi-cap funds over the past year. While the former has given a category average return of 7.59 per cent, the latter have fetched 3.18 per cent. One key reason for this is that mid- and small-cap stocks have outperformed large caps over this period (see table).

While diversification across asset classes is important, it is equally important for investors to stay invested across sub-asset classes, like large-, mid- and small-cap stocks. Investors can take exposure to them through separate funds, or via multi-cap funds.

Sebi’s mandate

In the October 2017 Securities and Exchange Board of India